The iron filings factory: an economic parable

Every child who has been taught magnetism knows what is required: a horseshoe magnet, a sheet of paper and a quantity of iron filings.

In March 1949, the appropriate authorities of COMECON therefore reached an inescapable conclusion. If Socialism were to triumph over the American hegemonists, revanchists and their neo-imperialist lackeys, the People's Democracies would need scientists. Vast numbers of scientists. And if they were to have scientists, they would need school laboratories. School laboratories would need magnets. And magnets would need iron filings.

The magnets presented no difficulty. They would naturally be produced at Magnitogorsk – Magnet Mountain – in the Soviet Union.

But the iron filings?

After prolonged fraternal negotiations, the Polish delegation successfully secured the investment for the People's Republic. A suitable site was found in Mazursko-Pomorskie province, an overwhelmingly rural area which before the war had been an overwhelmingly rural area of Germany.

And so, through the heroic endeavour of the working masses, a gigantic iron-filings factory arose from the sugar-beet fields outside the town of Natomiast, population 15,000. The standard of Marxism-Leninism would flutter over Natomiast in the form of huge belching chimneys!

Shortages of cement, steel and bricks, combined with sabotage by reactionary anti-socialist elements, absenteeism and endemic drunkenness, delayed completion somewhat. Nevertheless, in November 1956 the Natomiast Leninist Progress Iron Filings Works – Natomiejskie Zakłady Opiłków Żelaznych im. Postępu Leninowskiego – was formally opened.

Its importance to the entire Socialist economic bloc could hardly be overstated.

A broad-gauge railway was constructed from the Soviet frontier to deliver pig-iron. Standard-gauge sidings carried the completed filings south and west to the fraternal People's Democracies. The filings themselves were dispatched in 100-kilogram sacks woven, under a bilateral trade agreement, from Chinese silk.

NZOŻ employed more than 3,000 inhabitants of Natomiast.

On the production lines, skilled workers patiently filed ingots of pig-iron. The resulting dark-grey powder was swept into neat piles, inspected beneath microscopes by quality-control technicians and bagged for shipment.

Production norms were established.

And exceeded.*

But this was much more than a mere factory! There were departments for administration, personnel, transport, maintenance, accounts, planning, supplies, security, ideological education and workers' welfare. Because the Polish People's Republic existed for the benefit of the working class, the official trade union maintained a sanatorium and holiday resort exclusively for NZOŻ employees and their families in the Złota Sól mountains near the Czechoslovak frontier.

Within the factory grounds, the workers had their own shop, where luxuries such as lard, mustard, bootlaces, nail scissors and hair curlers could occasionally be obtained even when the shelves in Natomiast itself were bare.

And so the works fulfilled its historic duty. From Magdeburg to Vladivostok, from Ulan Bator to Sofia, schoolchildren could sprinkle Natomiast iron filings over sheets of paper and discover that opposites attract.

Seven chimneys belched smoke above the works, visible for twenty kilometres, demonstrating beyond doubt how productive the factory was. Trains arrived carrying iron and departed carrying filings. Sometimes the works was paid in tractors, sometimes in oil and sometimes not at all.

There were good years and bad years. But everyone had a job.

And because everyone had a job, Natomiast had hairdressers, taxi drivers, cafés, cobblers and even a private-sector hat-maker, all managing, somehow, to make it from one month to the next.

The years passed. 1968 came and went. So did 1970 and 1976. The workers continued filing iron while members of the Works Party Committee took turns reading Marx, Engels and Lenin over the public-address system between popular songs.

Then came 1980.

The workers of Natomiast joined the wave of strikes spreading across Poland. Their demands included free trade unions, freedom of speech, the reinstatement of three dismissed filing-machine operators and the withdrawal of the new production norm requiring each filer to produce 3.15 kilograms of filings per shift. The workers also demanded the right to choose the man who sharpens their files.

For fifteen extraordinary months it appeared that everything had changed.

Then came Martial Law.

Things were never quite the same afterwards. Some of the younger workers left for Germany, Britain, Canada or Chicago. Others stayed at their files.

The Big Man from the Party who had run the factory for years was eventually replaced by a leaner, harder man from outside the town. He knew nobody in Natomiast. He did, however, know everybody in Warsaw. Then, in 1988, rumours began to circulate. There were strikes again. Officials from the Party no longer sounded quite so confident. People whispered that Communism itself might be finished.

In 1989 there were elections.

The workers were frightened.

What would become of the factory?

They could scarcely concentrate on their filing.

Management acted quickly. The state enterprise was restructured and renamed the Sendivogius Science Education Supplies Joint Stock Company, wholly owned by the State Treasury.

Nothing else immediately changed.

Privatisation. The Free Market. Freedom.

Deutschmarks and dollars could be bought openly in the streets. Western goods appeared in the shops, although at prices which seemed insane. You could go to church. You could hang out the Polish flag. Nobody seemed to mind.

And the former Party men suddenly had Mercedeses.

Then the orders stopped.

Bulgaria ceased buying Natomiast iron filings. The Soviet Union disappeared. Czechoslovakia disappeared. Ministries of education which had once placed annual orders in triplicate ceased even answering the telephone.

The works faced catastrophe.

The Solidarity men travelled to Warsaw.

“If the Natomiast Iron Filings Works closes, Natomiast dies,” they said.

Give us time. We will restructure. We will find western markets. We will invest. We will modernise. We will make iron filings more efficiently.

And, above all, we will save the jobs.

Warsaw listened.

The factory remained open.

For a while, things even seemed to improve.

Cash-strapped school-supplies departments from Bonn to Ottawa discovered that Polish iron filings could be bought for a fraction of the price charged by their traditional local suppliers. Within eighteen months Natomiast had completely reoriented its exports.

A new generation of managers appeared. They were young. They spoke English and German. They had fax machines and business cards. They used expressions such as “marketing strategy” and “cash flow”.

The oldest employees retired. The sanatorium was sold. The railway sidings rusted while brand new Peugeot and IVECO delivery vans replaced freight wagons. A computerised accounting system was installed.

Yet each year the company lost more money than the year before. The trouble was its cost base. The buildings. The warehouses. The workshops. The heating plant. The administrative departments. And above all, the people.

The Marshal and Voivode of Mazursko-Pomorskie province both understood the problem perfectly. If the works closed, Natomiast would die. There would be unemployment, demonstrations. And then – there would be elections, and the Marshal and his people would be out. 

Although the Marshal and the Voivode belonged to different political parties, they therefore agreed that the factory must be saved.

Twenty years passed. Across Poland, state enterprises large and small had been privatised. But the Sendivogius Science Education Supplies Joint Stock Company remained safely in public ownership, deemed a strategic asset.

Governments changed.

After every parliamentary election, the new government appointed new people to the ministries. The new people appointed new people to the supervisory boards of state companies. The supervisory boards appointed new chairmen. New chairmen appointed new directors. New directors appointed new managers. New managers appointed their friends.

After the next election, out they all went. A new team arrived. Few knew anything about iron filings. Fewer still wished to.

Each chairman nevertheless arrived with a strategic vision.

There was the Iron Filings Development Programme 2001–2005.

Then came Filings for Europe.

Then the National Iron Filings Competitiveness Strategy.

Most recently, consultants from Warsaw prepared NZOŻ 2020: Towards a Knowledge-Based Filings Economy.

On the shop floor, meanwhile, the West German filing machines bought in the 1970s had long since broken down, so iron was once again filed by hand, just as it had been in 1956. For every worker producing filings, two calculated VAT on the occasional sale and three more administered payroll and ZUS contributions. Health-and-safety documentation was exemplary. In April 2010 alone, seventeen cases of scraped fingernail were correctly recorded.

The Social Fund, though a shadow of its former self, continued to finance staff excursions, training seminars and increasingly drunken team-building weekends. The chairman, directors and senior managers retained their company cars, indispensable whenever an urgent meeting was required at the ministry in Warsaw.

Elsewhere, Poland had changed beyond recognition. Banks, construction companies, manufacturers and retailers operated according to international standards. Productivity soared. Foreign capital poured in. Modern factories appeared beside motorways.

But in Natomiast, the filings continued.

In a warehouse behind Production Hall No. 4 stood thousands of sacks of iron filings. Rain had penetrated the roof. Their contents had rusted together into solid blocks.

Nobody wanted them. Chinese manufacturers could supply cleaner, finer, more consistent filings for less than the cost of the sacks in which Natomiast packed its own.

The Sendivogius Science Education Supplies Joint Stock Company nevertheless still employed around 1,850 people. Natomiast itself had shrunk to 10,000 inhabitants. Closing the factory in a district with unemployment above 26% was considered politically unthinkable.

The hairdressers depended upon it. The restaurateurs depended upon it. The taxi drivers depended upon it. Even the hat-maker depended upon it.

And so, every month, the Polish taxpayer provided another few million złotys to ensure the continued production of iron filings which nobody wished to buy.

In December, the company announced that it had secured a further PLN 14.6 million under the Regional Programme for Innovation, Employment Protection and Industrial Competitiveness.

The chairman described the award as “a decisive vote of confidence in the future of the Polish iron-filings sector”.

The following morning, Production Brigade No. 3 exceeded its filing norm by 4.7%.

Natomiejskie Zakłady Opiłków Żelaznych im. Postępu Leninowskiego in 1956